PepsiCo's Donna Hrinak on Public Policy and Business in Latin America

JULIA KENNEDY: Welcome to Just Business, a series of interviews on global
business ethics.

Today I'm talking about global policy and business with Donna Hrinak, vice president
of Global Public Policy and Government Relations at PepsiCo.

Few people are better qualified to analyze the intersection of global and business
interests. As a former U.S. ambassador to Brazil, Venezuela, Bolivia, and the
Dominican Republic, and as a current Board Member of the Council
on Foreign Relations, Hrinak is well versed in global policy. And with experience
both at Kraft Foods and PepsiCo, she also understands the private-sector perspective.

JULIA KENNEDY: First, why don't I ask you a little bit about your background
and why you decided to make the leap from public sector and the Foreign Service
into the private sector.

DONNA HRINAK: I joined the Foreign Service at a pretty young age and always
said that I didn't want to be 65 and wonder if I could have ever done anything
else. So when I had the chance to leave government and move into the private
sector, I did.

I really had developed a great respect for the private sector during my years
in government, and I think the U.S. private sector, particularly, has always
been a model for how companies should act overseas as corporate citizens. I
think more and more companies from other parts of the world are following that
model.

But I know U.S. corporations got a bad rap in many cases for their actions and
involvement in politics in one country or another. What I saw was almost universally
admirable.

JULIA KENNEDY: Give me an example of something you saw that said to you,
"This is something I want to get involved in."

DONNA HRINAK: I'll give you an example from my days in Brazil. Actually,
it was an example that we promoted for the Secretary
of State's Award for Corporate Social Responsibility. That was an example
from Motorola, actually. I cite it because it's a great example of a company
really considering what its value-add would be in the area of CSR.

A lot of companies were involved with environmental or education initiatives,
all excellent activities and all badly needed. But Motorola said: "You
know what we do? We do communications, and what you need in Brazil is communications
among the law enforcement forces."

This was after 9/11,
so we had run into that same problem here in the States. They started an
initiative to upgrade communications equipment so that law enforcement in Brazil
could talk to each other across agencies. I thought that was a great example
of a company saying, "What can we do better than maybe anybody else, and
let's make that our contribution." They did it, and they won the award.

JULIA KENNEDY: You left, and you started with Kraft Foods. What was that
experience like?

DONNA HRINAK: It was excellent.

I have to say the food and beverage industry is really interesting to me because
we have a real, intimate relationship with our consumers. I worked closely with
Kraft Foods in Brazil, which was highly involved in the hunger program that
Lula
had sponsored. I was interested also in how the food and beverage industry could
address this really basic problem, not just in Brazil but around the world.
So that was my entrée to the food and beverage industry.

Then, fortunately, I was able to move to PepsiCo. I'll tell you,
the advantage to PepsiCo, for someone like me, is that the company really
takes positions on public policy issues; it wants to be involved in the debate.

You know, our CEO is a force of nature. Indra
Nooyi is an example of how a CEO can really bring the force of a corporation
to influence some of the big global issues that are affecting everyone in the
world.

JULIA KENNEDY: Why don't you talk a little bit about your job here, and what
your role is here at PepsiCo?

DONNA HRINAK: I actually have a couple of different hats.

Globally, I'm responsible for health and wellness policy issues. That means
working, in particular, with multilateral organizations in the health and wellness
sphere, the World
Health Organization being the most prominent of those.

I work both as a representative of PepsiCo directly and also as a representative
of PepsiCo through a couple of industry associations that we belong to, including
the most prominent, the
International Food and Beverage Alliance, which are ten global food and
nonalcoholic beverage companies that have the shared objective of helping people
achieve healthier lifestyles.

JULIA KENNEDY: It sounds like you are working mostly with nongovernmental
organizations and international organizations. Or do you also work with national
governments?

DONNA HRINAK: In the health and wellness sphere, in particular, I work with multinational
organizations and global NGOs [non-governmental organizations] and other global
companies.

Then I have a regional responsibility too, which is where my heart really lies,
and that is in Latin America and the Caribbean. In that area, I work on all
issues, from siting new plants, to taxation issues, to health and wellness.

JULIA KENNEDY: Tell me about the Latin America market. What is Pepsi mostly
doing in Latin America? Are there certain products that you do more than others?

DONNA HRINAK: It's a really important market for us. Mexico is our second-largest
market outside the United States, for example. Brazil is obviously a growing
market. We are opening new plants there in both the food and beverage area.

We have some products that are unique to that market because we grew through
acquisition in many cases. You'll see some of our foods and some of our beverages
are Latin America-specific. But we also have 19 global billion-dollar brands,
and those are as prominent in Latin America as they are elsewhere around the
world.

JULIA KENNEDY: Are these brands ones that people might have heard of, such as Quaker, Tropicana,
and Frito-Lay?

DONNA HRINAK: All of those, yes. And in Mexico, Sabritas and Gamesa.

I spoke to a Mexican minister when I first took this job and said, "I work
for PepsiCo."

He looked kind of quizzical.

Then I said, "In Mexico, we are Sabritas and Gamesa."

And he just lit up. "Well, of course you are!"

Those are iconic Mexican brands, the way Elma or Lucky Chips are iconic brands
in Brazil, for example. Frito-Lay brands that are the same product—but
we know them here in the States by another name —would be Margarita chips in Colombia,
for example.

So many people know PepsiCo products and brands, even if they don't
know that that is PepsiCo.

Part of the challenge in my job, and part of my responsibility, is to make sure
that people see the connection. We employ a lot of people in Latin America.
In Brazil we employ about 11,000 people, for example. If you just think of PepsiCo
as the carbonated soft drink, you are not going to understand what our impact
is.
JULIA KENNEDY: How much do you tailor products that do have the same name in
different countries to those markets? Do you ever use different ingredients
or have different branches of a certain product that is tailored to Latin America?

DONNA HRINAK: I think that's going to happen more and more, as we get increasingly global. I look particularly at our China business, where we have some
beverage products that use traditional Chinese ingredients—in teas, for
example—that are really China-specific. It will be interesting to see whether
those kinds of products travel well to other regions of the world or even other
countries in Asia. So sometimes, yes, they are very specific products for very
specific markets.

But in other cases, we have formulas for certain products that are the same
around the world. A Pepsi-Cola in Venezuela is going to taste the same as a
Pepsi-Cola in Saudi Arabia.

JULIA KENNEDY: You started at Pepsi, actually, when Indra Nooyi was already
here.

DONNA HRINAK: She was, yes. She was already CEO. She had been chief of strategies
and CFO at PepsiCo beforehand.

JULIA KENNEDY: She started with the company in the 1990s, I think.

DONNA HRINAK: Yes, exactly.

JULIA KENNEDY: How do you see this as different from the way that other multinational
corporations are run, with this big overarching idea of "performance with
purpose"?

DONNA HRINAK: It's exactly that, that it is overarching, and it covers all
of our activities. We really look at this as a holistic undertaking.

We don't apologize for being a profit-making corporation. That's the "performance"
in the motto. We have an obligation to shareholders.

But we think that we should have a broader purpose beyond just profits, and
we owe that to our shareholders as well. Indra likes to say, "We're people."
Well, our shareholders are people too, and they have interests beyond just making
money on PepsiCo shares.

So the "purpose" part of "performance with purpose" speaks to our consumers, to our customers, to our shareholders, to stakeholders
in different areas, which include environmental sustainability (we all live
on this planet, breathe this air, and use the water), human sustainability (we
all want to be healthy), and talent sustainability.

It is somewhat directed toward our associates, making sure that we have a work force that
reflects the countries in which we do business, but also the communities where
we operate. We support education programs that benefit the broader community.
But guess what? It means that there are more qualified people to work for PepsiCo
also.

JULIA KENNEDY: So then, how does that affect you in public policy? I think
a lot of people see "government relations" and think "lobbyist,"
right?

DONNA HRINAK: That is not a four-letter word, by the way. It's perfectly
acceptable to be a lobbyist. I always rejected that idea that there is something
wrong with being a lobbyist.

JULIA KENNEDY: Right. No, of course. Everyone needs to watch out for their
interests.

DONNA HRINAK: Right.

JULIA KENNEDY: But then, also there is an element of public policy that says,
"We are a global citizen as well." So I was wondering if you could
talk about that balance.

DONNA HRINAK: I think it actually gets to the definition
of lobbyist, because looking out for interests is certainly how I think
most people would see lobbyists. But many times lobbyists inform and educate.

When I was in government, when lobbyists approached me, I often learned
a lot from them about the concerns of their industry or the company they were
representing.

So that's what we try to do in public policy too, to say, "Some
of these issues are more complex than you might have considered, and let us
present to you some complexities. The solutions have to be a little bit
broader-based than we might otherwise have realized before, more so than you might have
realized." And we learn from them.

DONNA HRINAK: One of the events that we have sponsored in the preparation
for the high-level meeting—and PepsiCo is the co-chair of the International
Food and Beverage Alliance right now, by the way—was on NCDs,
noncommunicable diseases, seen through a development lens: How do they affect
development? This is the approach that the UN is taking.

JULIA KENNEDY: We're talking about—you may have said it already—diabetes
and heart disease and—

There are a lot of people that think the food and beverage industry is part
of the problem on noncommunicable diseases—obesity is a contributing factor
to many of these diseases—and would just say, "Just change your products,
so that people will be able to eat more healthfully."

Well, it's not quite as simple as that. The best product in the world isn't
going to help people live more healthfully if they won't eat it. So it has to
be tasty. So what kind of research and development can we bring to the table
that says, "We can create healthier products that are tasteful as well"?

We can include more fruits and vegetables in our products. Oh, and by the way,
there's a double burden—not just obesity and noncommunicable diseases,
but also there are still micronutrient
deficiencies in many countries. There are deficiencies in vitamin A and
iron. How do we fortify foods to ensure that we address those issues as well?

When you look at obesity or you look at nutrition, I think bringing in all of
these different angles helps people understand maybe that there are more stakeholders
on these issues than you might have initially believed.

JULIA KENNEDY: The reason I wanted to ask you about this declaration was
also I read an article about some activists that said, "Well, there should
be benchmarks for sodium levels and sugar levels." So I'm curious what
your position on that is.

DONNA HRINAK: PepsiCo has our own benchmarks on reducing sodium, on reducing
sugar and saturated fats. So we don't have any problems with benchmarks.

But the benchmarks have to be science-based, evidence-based. So I think that
when you include benchmarks in a political declaration, you have to make sure
that you have some sound basis for including those targets that you might want
to have in a declaration.

The declaration right now—and it's still in draft form—calls for some
benchmarks or targets to be developed over the course of the next 15 months.
Hopefully, that will allow time to consider just what science is available.

JULIA KENNEDY: Tell me a little bit about setting your own internal targets
or benchmarks, whichever word you want to use here, at Pepsi. How did that happen,
and why is that a priority for the company?

DONNA HRINAK: In these three areas of human, environmental, and talent sustainability,
we wanted to make concretely clear what we were talking about. So
we came up with a series of promises in each of these areas.

We realized that one of the things we can do is reformulate the products, as
we've committed to through the International Food and Beverage Alliance. So
we wanted to state specifically how we could reformulate our products.

Sodium is the best example here. We have cutting-edge technology on how you
redesign sodium crystals that you're including in your products, so that the
sodium taste—the salty taste that consumers really like—will come
through with a smaller amount of sodium included in the product.

It came about through discussions, saying: Okay, if you're talking about human
sustainability, what does human sustainability mean? Well, it means understanding
that children are a particularly vulnerable group, and so we want to have marketing
and advertising restrictions on what we will say to children.

We recognize that schools are places where children make decisions on their
own without their parents' supervision, so we wanted to make sure that we had
products in schools that are healthier products.

We believe in choice, and we produce a wide portfolio of products. Almost all
of them can be included in a diet. Obviously, a person who suffers from diabetes
or has other medical conditions will have to be more careful about what products
they consume. But our products are designed to offer a range of choices for
people to make their decisions.

JULIA KENNEDY: I know a lot of schools have been banning vending machines
or certain snacks to be offered. So I'm wondering if there is a growing market
for these healthy snack foods that Pepsi sees in its long-term planning.

DONNA HRINAK: I think this is a key, to make sure that consumer taste and
offerings from the food and beverage industry move apace.

One of the commitments we've made through the International Food and Beverage
Alliance—and it's part of what PepsiCo promises as well—is to inform
consumers, to give consumers the information that they will need on what is
actually in the products that they're buying.

So we support on-pack labeling, for example. Or where that's not possible, or
where additional information is needed, we provide website information.

So how do you communicate that kind of information beyond the developed world?
I have worked in countries where candidates' names on a ballot had to be accompanied
by a party animal symbol because people really could not read the name of the
party, so they couldn't tell who they were voting for. How do you communicate
how much sodium is in a product through a label that will be meaningful in an
emerging market?

It has been quoted back at me several times by a colleague and a friend who
works at the Pan
American Health Organization, because I said one time, "You have to
help us educate and inform consumers, because no company is going to shoot itself
in the foot. As long as consumers want to buy these products, we are going to
keep making them."

Now, do we have responsibility to make sure that consumers are better informed?
PepsiCo believes we do.

JULIA KENNEDY: I also want to return to Latin America a little bit. What
specific regional particularities are there in Latin America at the intersection
between government and business that you find, whether it's entering new markets
or developing markets, whether it's political risk or business risk? What do
you see cropping up?

DONNA HRINAK: It's kind of a twofold challenge now, I think.

One of the challenges is more longstanding. It's no secret that the United States
has a bit of baggage in Latin America, in certain countries in particular. That
has always been an issue for U.S. companies: How do they balance their U.S.
identity with being clearly a corporate citizen of the country in which they
were operating? How do they make clear that what's good for General Motors isn't
always good for the United States, and vice versa? I think that has been a challenge
for U.S. companies in the region.

JULIA KENNEDY: Because they are seen as this hegemon who's coming in. Is
that it?

DONNA HRINAK: Yes.

You look back at United
Fruit in Guatemala, for example, in the 1950s. A company operating in Latin
America in the 21st century is quite different from a company operating in Central
America in the 1950s.

But one of the things you learn when you go overseas as a U.S. diplomat is that
we in the United States have very short memories, and people in the other regions—particularly
in Latin America—have much longer memories. So it's easy for us to say,
"Oh, get over it already." It's not so easy for them to think in that
same way.

But the new challenge is precisely that we are competing against global companies
now, and not just global companies the traditional Unilever or Nestlé
from Europe—but we're competing against multi-Latinas too, Latin American
multinationals that are expanding into the United States and elsewhere. So the
competitive set has just grown immeasurably in the last generation.
JULIA KENNEDY: One thing that I was excited about is that Pepsi now has a line
of coconut water.

DONNA HRINAK: Yes, we do.

JULIA KENNEDY: That's a Brazilian product that is now traveling to the States.

DONNA HRINAK: Exactly, yes. It shows that we can create export platforms
in these countries too. Brazil is a great example because we export from Brazil
to the United States and to other countries in South America.

We export from Mexico throughout the region. We export from Argentina to Chile
and vice versa; their products just cross the border.

Now, this puts a premium on trade agreements that, for example, allow us to
use the same kind of labeling standards in one country as we do elsewhere. It's
tremendously complicated to do cross-border trade if the labeling requirements
are different in one country from another. So Mercosur
[Mercado Común del Sur, or Southern Common Market] standardization
of labeling is very important.

And the kind of business facilitation: We started talking about free trade agreements
in the Americas, or we look at bilateral free trade agreements. I think people
saw it as big-picture integration.

For a company on the ground, it means have labeling standards that apply everywhere,
that facilitate operations in your ports. So it's really nitty-gritty issues
that make trade possible.
JULIA KENNEDY: I also wanted to ask you a little bit about this global citizenship
question more broadly. You mentioned Motorola. I'm sure you see a lot of other
corporations taking on a bigger global citizenship role. Depending what you
read, you see a lot of different motivations cited for that—whether it's because
there's so much transparency with consumers, consumers or shareholders are crying
out for it more, it's a magnetic CEO, or it's fear of future government regulation.
So I'm curious if you see this as a combination, or if there is one factor that
is really driving a lot of the increased global citizenship among corporations.

DONNA HRINAK: I think it's a combination, actually. I guess with any one
particular company the exact mix of those factors would vary.

But certainly we think shareholders are more concerned about these kinds of
issues. We are very proud. We are the only U.S. company in this year's Dow
Jones Sustainability Index that is a super-sector leader in food and beverages.
We're terribly proud about that, because we know that position on the Dow Jones
is reflected in analysts' reports and in companies' stock prices. So we think
that can only be good for PepsiCo, as it has been good for the communities where
we are operating that have allowed us to present the evidence that puts us into
that position.

I think having a magnetic CEO is very important; it sets a standard. But the
important thing is infusing that message throughout the organization. I think
PepsiCo has been particularly good about that, when you hear it not just from
the CEO, but from the business unit leader in a small country in Latin America,
or from a country in the Middle East where you're a market leader. They say,
"This gives us a special responsibility because we are leading the market
here." That's what really is important.

And transparency, yes, absolutely. We are very proud of the commitments we have
made, and we encourage people to judge us by them.
JULIA KENNEDY: Another interesting thing that I read about Pepsi—and
I don't know if this is in your department or not—but as for the Pepsi
Refresh project, I read somewhere that it didn't bump up profits as much
as Pepsi had hoped, but they were going to continue doing it anyway. So I'm
curious if you know anything about what went into that decision, and why Pepsi
is committed to continuing it.
DONNA HRINAK: We are committed to doing it just because we see ourselves
as a really important player in many of the communities.

JULIA KENNEDY: I didn't even say what the Pepsi Refresh project is. It's small grants to local organizations.

DONNA HRINAK: Small grants, and the local organizations compete.

JULIA KENNEDY: They compete online.
DONNA HRINAK: Exactly right. They get people to vote for their projects.
I just think we have had tremendous impact on the ground where it counts, particularly
in this economy.

For a kid that needs a computer in a classroom, the PepsiCo Refresh Project
has had tremendous impact.

I think a combination of doing those big advertising campaigns, and creative
campaigns—and we've had some great creative advertisements, in the Super
Bowl in particular, some of which have come from amateurs putting together their
own commercials for our products—but making that combination with this
really on-the-ground, we can do it where the rubber meets the road.

I think that's a balance we are striving to hit—and I think we are making
a good balance—in all places around the world. How do we talk about "Performance
with Purpose" in Brazil and make sure that that reaches the potato farmers
that we are buying the product from? What does that mean, when you are buying
in the supply chain in a small market like Ecuador or Peru?

We have a product called Lays Andinas. It was a potato chip that we developed
in Peru with the traditional Peruvian potatoes that are purple, blue, or gold-yellow.
So these are potatoes that look really beautiful. Not only are they a tasty
product, but they say something about Peruvian culture. To the farmers that
produce that traditional kind of potato crop—that maybe doesn't make it
into French fries everywhere—this gave them a sense of pride, I think, that
their products were valued.

JULIA KENNEDY:Interesting.

I guess the only other question I want to ask you is, are you traveling a lot
to Latin America? I know you live in Danbury, so you probably travel there quite
a bit if you can, if you want to go to a Brazilian restaurant or something on
Main Street.

DONNA HRINAK: We're very fortunate in Danbury to have a really great
ethnic mix of Brazilian, but also other South American countries, a large Central
American population, not to mention Italians and Germans. So yes, it's a great
ethnic mix.

But I am on the road a lot, also. And frequently we're also receiving visitors
here in Purchase, where Pepsi headquarters are located. We have lovely grounds.
This was a sculpture
garden that Donald
Kendall started when we moved our headquarters out here from Manhattan.
The community takes advantage of it. You can see people walking their dogs or
jogging in the park. Fortunately, visitors from Latin America and elsewhere
like to come and take the tour of the sculptures as well.
JULIA KENNEDY:Oh, that's fantastic. Donald Kendall, of course, is a
friend of the Carnegie Council, so it's wonderful to hear about that.

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